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Specialist UK institutions that do not hold their own degree-awarding powers are appealing a decision by the US Department of Education that would stop their American students accessing US government loans.

The department tightened its criteria in November 2011, requiring that foreign institutions not only award recognised education credentials to be eligible for the Federal Direct Loan scheme, but that they award those credentials directly.

According to one estimate, the move, backdated to include courses starting from July 2011, would affect hundreds of US students at specialist institutions and conservatoires whose degrees are validated by other universities, including those already midway through their degrees.

The London Academy of Music and Dramatic Art (Lamda) is warning 15 postgraduate students embarking on its long-standing MA programme tailored to US students that they may have to find alternative means of funding.

"In this country, conservatoires like Lamda or the London Film School, where you're teaching something specific and discrete, are quite small bodies and it's rare to have degree-awarding status," Joanna Read, principal of Lamda, told Times Higher Education.

"I can't imagine [the US Department of Education] would want to deny American students access to the quality of education provided at these institutions."

Institutions are in the process of receiving official notice of the change and will be given the chance to appeal.

A spokeswoman for the Department for Business, Innovation and Skills confirmed that the government had lobbied the US Department of Education on behalf of the institutions and was awaiting a response.

Speaking at the Higher Education Funding Council for England's annual conference in April, universities minister David Willetts stressed that the distinctive features of these institutions were not well understood.

"While so-called 'listed bodies' in our system do not have their own degree-awarding powers, all of their students on validated courses graduate with degrees of equal standing to students taught at the awarding body itself," he said.

As listed bodies, colleges at the universities of Oxford and Cambridge were originally among the institutions that would have been affected. They were granted exemption by the US Department of Education in May.

"I guess common sense did intervene at some point in the case of Oxford and Cambridge," said Harrison Wadsworth, executive director of the International Education Council, a US-based not-for-profit organisation.

"In the case of the others, they've decided to stick to their guns."

According to Mr Wadsworth, the Federal Direct Loan, which provides students with up to $20,500 a year (£13,150) depending on the course, is the primary source of funding for most US higher education students.